A roundup of some of the North American equities making moves in both directions today
On the rise
Freehold Royalties Ltd. (FRU-T) soared in the wake of raising its outlook for 2021 and increasing its dividend.
After the bell on Thursday, the Calgary-based company increased its annual production guidance to 10,500-11,000 barrels of oil equivalent per day from 10,000-10,500 boe, pointing to a jump in drilling activity. It also bumped its monthly dividend by 1 cent to 3 cents based on an improved commodity price outlook.
In response to the announcement, a series of equity analysts raised their targets for Freehold shares.
Barrington Research analyst James Goss thinks Japan and China are “pointing the way” for a recovery from the pandemic.
In a research note, he said: “The company was able to achieve positive free cash flow in the quarter with a significant rebound in consumer sentiment in open markets.”
“In markets where viral spread has been minimized, consumers have largely returned to more normalized patterns of out-of-home entertainment. IMAX had a record Chinese New Year Opening weekend, featuring multiple titles across its circuit and generating a 6-per-cent share of box office across 1 per cent of the country’s screens, highlighting both the value that consumers place on its experience and the ability to draw customers when tentpole titles return. Other countries with lowered viral spread have also seen significant improvement in box office trends, which can support meaningfully improved cash flow trends for the company. China also benefited from the first film in that important market shot totally in IMAX cameras. Japan benefited from its biggest ever local language film. China has the largest base of IMAX screens at roughly twice the number in the United States and Japan has a growing presence that includes a sizable share of the most productive screens. Theatres in backlog would increase the IMAX footprint by about one-third.”
ATB Capital Markets analyst Waqar Syed said: “ESI delivered another quarter of strong operational performance. We view the generation of $20-million in FCF and debt reduction as positive, although ESI’s net debt to capital remains among the highest in its peer group. We think the key driver of ESI’s stock performance will be forward guidance, which may be provided in today’s conference call. We deem the paydown of debt to be a positive.”
Shares of Broadcom Inc. (AVGO-Q) rose after the company, which is a major supplier to iPhone maker Apple Inc., reported chip sales slightly below analysts’ estimates, joining a growing list of chip industry peers hit by a global semiconductor shortage.
Broadcom reported semiconductor solutions revenue of US$4.90-billion for its fiscal first quarter ended Jan. 31, slightly below analyst estimates of US$4.95-billion, according to IBES data from Refinitiv.
Kinngai Chan, analyst at Summit Insights Group, said an industry-wide shortage of substrates - the raw silicon discs used to make chips - has hit Broadcom harder than others because some of its chips are physically large, especially in the data center space. That meant the company’s chip revenue fell short of expectations despite strong smartphone sales from Apple.
“While we had anticipated some challenges in the supply chain for Broadcom in the January quarter, its semiconductor business performance did underperform its large-cap peer group in spite of the stronger-than-seasonal wireless business.”
Turquoise Hill Resources Ltd. (TRQ-T) finished higher as activist investor Pentwater Capital Management LP on Friday condemned the surprise resignation of its chief executive officer following pressure from the Canadian miner’s top shareholder Rio Tinto.
Turquoise Hill said on Thursday Ulf Quelmann resigned, effective March 3, after Rio said it would vote against his re-election to the board.
Pentwater, Turquoise Hill’s largest shareholder after Rio with a 9-per-cent stake, said it believed the boards of Turquoise and Rio breached their legal obligations in the way Mr. Quelmann’s departure was handled.
In response to Pentwater’s statement, a Rio spokesman said the company supports the reset of leadership at Turquoise.
During Mr. Quelmann’s over two-year tenure as CEO, Turquoise found itself locked in a feud with Rio over how to fund the underground expansion of the massive Oyu Tolgoi copper-gold mine in Mongolia.
Rio is the operator for the mine and owns 51 per cent of Turquoise Hill, which in turn owns 66 per cent of Oyu Tolgoi.
On the decline
Martinrea International Inc. (MRE-T) dropped despite telling analysts that they were optimistic on the company’s prospects for electric vehicles, even as a shortage of microchips has become a burden on the auto industry.
The comments came as Martinrea capped a difficult year in which it faced automotive plant closures with its net profit falling 12 per cent to nearly $45-million in the final quarter of 2020.
Martinrea executives said there have been “hiccups” around semiconductors amid a worldwide shortage, and that it’s likely to be “bumpy” going forward. General Motors said this week than an Ontario plant would have more downtime through at least mid-April. GM is one of several automakers to idle plants this spring amid the chip shortage.
Martinrea executives said that there is sometimes only a week’s notice of whether chip shipments will come to the automakers, and that the whole industry had “underestimated” the issue.
“We are seeing tremendous fluctuations in releases from many customers,” said chief executive Pat D’Eramo.
“This is a combination of the chip shortages, and harsh winter weather in the southwest U.S., all causing significant downtime to our customers due to the lack of natural gas caused by the winter weather in Texas. The weather and natural gas problems have subsided, but the chip shortage will persist.”
See also: Friday’s analyst upgrades and downgrades
Parkland Corp. (PKI-T) closed down after reporting lower fourth-quarter earnings and revenue after the bell on Thursday as affects of the COVID-19 pandemic lockdowns continue to erode fuel sales.
The Calgary-based convenience store operator and fuel retailer says it had net earnings of $53-million in the last three months of 2020 on revenue of $3.47-billion, down from $176-million on revenue of $4.78 billion in the same period of 2019.
It says it sold 5.4 billion litres of fuel and petroleum products in the fourth quarter, a decrease of seven per cent compared with the year-earlier period.
It says lower volumes were offset by strong per unit fuel profit margins in Canada and in its international operations, as well as robust company convenience store same-store sales growth in Canada of around eight per cent and a healthy 90 per cent utilization of its Burnaby, B.C., refinery.
Parkland says it will hike its dividend by two per cent, its ninth consecutive annual increase.
The company says it plans growth capital spending of between $175-million and $275-million in 2021, along with between $225-million and $275-million in maintenance capital spending, including about $40 million of work deferred from 2020.
In a research note, Elias Foscolos, an analyst at iA Capital Markets, said: “After adjusting for one-time charges, PKI’s Q4/20 financial results were within our expectations. Most importantly, the Company provided 2021 EBITDA guidance of $1.2-billion, which essentially matches our prior estimate. 2021 results will be driven by recent acquisitions and the economic recovery from the impacts of COVID-19. Looking into 2022, investors should see continued growth as we expect the Company will exercise its option to buy the remaining shares of SOL”
The Oakville, Ont.-based company reported adjusted EBITDA and earnings per share of US$253-million and 21 US cents, respectively falling below the consensus forecast of US$264-million and 23 US cents.
In a research report, Raymond James analyst David Quezada said: “Concerns over rising rates and Texas storms have pressured the stock, but we believe this weakness is overdone. With shares of AQN down 13 per cent over the past 3 weeks (vs TSX down 1 per cent), we peg the company’s 2021 P/E ratio at 21.1 times. This represents roughly the midpoint of the 17-25-times historical range and a discount to NA peers with comparable growth at 22 times on average. We highlight the company’s top-tier growth noted above, strong ESG credentials and sizable U.S. renewable power development potential, support a premium valuation vs. peers.”
Recipe Unlimited Corp. (RECP-T) ended flat after it saw system sales fall more than 30 per cent in its most recent quarter as the pandemic continued to cause dining room closures and seating restrictions at its restaurant chains across Canada.
The Vaughan, Ont.-based company says system sales in its fourth quarter totalled $611.3-million, down 31.8 per cent from $895.8 in the same quarter the previous year
Frank Hennessey, CEO of the restaurant conglomerate, says Recipe Unlimited was impacted by mandated full closures or severely restricted capacity constraints due to COVID-19.
Still, the company, which operates brands like Swiss Chalet, Harvey’s, St-Hubert and The Keg, saw off-premise system sales for the 13 weeks ended Dec. 27, 2020 of $150.4-million, a 66.6 per cent increase compared to $90.3-million in the same period of 2019.
Recipe Unlimited says its fourth-quarter revenues were $210.9-million, down from $327-million in the same quarter of 2019.
Adjusted net earnings for the quarter were $16.1-million or 28 cents per diluted share, down from $44.8-million or 77 cents the year before.
Costco Wholesale Corp. (COST-Q) was lower after the warehouse club operator missed estimates for second-quarter profit.
In a quarter during which Costco saw a surge of online shopping, the company based in Issaquah, Washington, said it earned US$951-million, or US$2.14 per share. That’s compared to a profit of US$931-million, or US$2.10 per share, in the same period a year earlier.
But the results were below analysts’ expectations.
The average estimate of 13 analysts surveyed by Zacks Investment Research was for earnings of US$2.42 per share in the latest quarter.
Costco said the premium COVID-19 pay for its employees trimmed its profits by 41 cents per share.
Virgin Galactic Holdings Inc. (SPCE-N) dropped after regulatory filings showed venture investor Chamath Palihapitiya sold his remaining personal stake in the space tourism company he helped take public in 2019 for around US$213-million,
Mr. Palihapitiya sold 6.2 million shares, leaving him with about 15.8 million shares in Virgin Galactic, where he remains chairman. The remaining 6.6-per-cent stake in the company is through an investment firm, which is in partnership with British investor Ian Osborne.
Mr. Palihapitiya said in a Twitter post on Dec. 16 that he had sold 3.8 million Virgin Galactic shares to manage his liquidity.
Mr. Palihapitiya’s first SPAC merged with Virgin Galactic in 2019 allowing the space tourism company to go public with a US$2.3-billion market capitalization, without itself launching an IPO.
With files from staff and wires